who is prime minister in a caretaker capacity after last month's inconclusive election.

Monti says Italy has scope to cut government debt owed to companies

ROME (Reuters) - Italy is close to finding a way to pay off huge public sector debts owed to private companies without pushing up the public debt, outgoing Prime Minister Mario Monti said on Monday.

Italy's public administration, struggling to curb costs to try to balance the budget, is notoriously slow in settling its bills to private companies that provide it with goods and services and has accumulated a debt of more than 80 billion euros.

The government has been pressing the European Commission to grant it leeway to allow it to start settling these arrears without contributing to public debt calculations and important progress has now been made, the prime minister said.

"We will work with the Commission to identify technical solutions to begin to settle the payments as soon as possible," said Monti, who is prime minister in a caretaker capacity after last month's inconclusive election.

On Wednesday President Giorgio Napolitano will begin consultations with parties to try to see if there is any chance of establishing a government, but this could take weeks or even months.

Italy's public debt amounts to more than 2 trillion euros and, at 127 percent of output, is the second highest in the euro zone after Greece's.

(Reporting by Gavin Jones; Editing by Susan Fenton)

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